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2012 NATURAL CATASTROPHE YEAR IN REVIEW

January 3, 2013

Agenda

Welcome/Introduction Terese Rosenthal

US Natural Catastrophe Update Carl Hedde

Global Natural Catastrophe Update Ernst Rauch

Economic Implications of Natural Catastrophe Losses Dr. Robert Hartwig

Questions and Answers

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3 US NATURAL CATASTROPHE UPDATE

Carl Hedde, SVP, Head of Risk Accumulation Munich Reinsurance America, Inc. MR NatCatSERVICE One of the world‘s largest databases on natural catastrophes

The Database Today . From 1980 until today all loss events; for USA and selected countries in Europe all loss events since 1970. . Retrospectively, all great disasters since 1950. . In addition, all major historical events starting from 79 AD – eruption of Mt. Vesuvius (3,000 historical data sets). . Currently more than 31,000 data sets

5 US Natural Catastrophe Update 2012 Headlines

. Insured losses in the United States in 2012 totaled $57.9 billion – far above the 2000 to 2011 average loss of $27 billion (in 2012 Dollars).

. Hurricane Sandy makes landfall in New Jersey, becoming the worst storm to hit northeastern United States since the Great New England Hurricane of 1938, causing insured losses in excess of $25 billion.

. Despite a relatively quiet year for tornadoes, insured losses from thunderstorm events exceeded $14 billion, the second highest annual total on record.

. Severe drought cripples agriculture over large section of central United States.

. Dry conditions lead to the most damaging wildfires in Colorado history.

Number of Estimated Overall Estimated Insured As of January 1, 2013 Events Fatalities Losses (US $m) Losses (US $m)

Tropical Cyclone 4 143 52,240 26,360

Severe 115 118 27,688 14,914 Thunderstorm

Drought 2 0 20,000 16,000†

Wildfire 38 13 1,112 595

Winter Storm 2 7 81 38

Flood 19 3 13 0

Number

300 2012 Total: 184 events

250

200 41 150 19 100 121 50

3 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Geophysical events Meteorological events Hydrological events Climatological events (Earthquake, tsunami, (Storm) (Flood, mass (Extreme temperature, volcanic eruption) movement) drought, forest fire)

Insured losses in the U.S. In 2012 were the second highest on record.

(bn US$)

200

180

160

140

120

100

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Overall losses (in 2012 values) Insured losses (in 2012 values)

Estimated Economic Estimated Insured Date Event Losses (US $m) Losses (US $m)

June – Sept 2012 Central US Drought 20,000 16,000†

March 2 - 3 Thunderstorms 5,000 2,500

April 2 – 4 Thunderstorms 1,550 775

April 13- 15 Thunderstorms 1,800 910

April 28 – 29 Thunderstorms 4,500 2,500

May 25 – 30 Thunderstorms 3,400 1,700

June 6 – 7 Thunderstorms 1,400 1,000

June 11 – 13 Thunderstorms 1,900 950

June 28 – July 2 Thunderstorms 4,000 2,000

August 26 - 30 Hurricane Isaac 2,000 1,220

October 28 - 30 Hurricane Sandy 50,000 25,000 Source: MR NatCatSERVICE © 2013 Munich Re 10 † - Includes Federal Crop Insurance Losses. US Natural Catastrophe Update Significant Natural Catastrophes, 1950 – 2012 Number of Events ($1 billion economic loss and/or 50 fatalities)

Eleven significant natural catastrophes occurred in the United States in 2011.

Photo: NASA US Natural Catastrophe Update Tropical Cyclones Impacting the United States in 2012

Beryl

Sandy Debby

Isaac

Hurricane Isaac . Landfalls on August 28 over the Mississippi River delta and Port Fourchon, Louisiana

. Minor to moderate wind damage in Louisiana and Mississippi, indirect wind damage due to tree fall further north.

. Storm surges up to 11 feet in some locations, but New Orleans levees held but some breached south of city; heavy rainfall caused significant inland flooding.

. Economic Losses in US of $2 billion,

insured losses of $1.2 billion Photo: FEMA

Hurricane Sandy . Landfalls on October 29 near Atlantic City, NJ

. Minor to moderate wind damage along coasts of NY and NJ, widespread indirect wind damage and power outages due to tree fall across 15 states.

. Record storm surge of 13.88 feet in Battery Park, NY and 15+ feet along New Jersey coast.

. Economic Losses in U.S. of $50 billion, insured losses of $25 billion

Photo: FEMA

Hurricane Sandy

. Add few more bullet points

Photo: FEMA

Tropical Storm Beryl . Landfall on May 28 near Jacksonville, Florida as a tropical storm with sustained winds of 70 mph; strongest May tropical storm ever to make US landfall. . Minor wind damage and flooding in Florida and Georgia.

Tropical Storm Debby . Landfall on June 26 near Steinhatchee, Florida as a tropical storm with sustained winds of 40 mph. . Torrential rains of up to 25” caused extensive flooding in the Florida Panhandle, with lesser flooding elsewhere in the state.

There has not been a major hurricane landfall in the US since Wilma in 2005.

The current 5-year average (2007-2012) insured tropical cyclone loss is $8.9 billion per year.

Source: FEMA US Natural Catastrophe Update 2012 US Tornado Count

. June 28 – July 2: Long-lived derecho (straight-line windstorm) causes extensive wind damage from Indiana to Maryland. Millions were without power for days. US$ 2 billion insured loss.

. December 25 - 26: Tornado outbreak in deep south along a strong cold front. Over 51 tornadoes reported. Insured losses to be determined.

Source: FEMA

Average thunderstorm losses have increased sevenfold since 1980.

First Half 2011 2011 Total: $16.4$16.4 bnbn

Source: FEMA US Natural Catastrophe Update Current US Drought Conditions

. Worst drought in at least 25 years, dry to severe drought conditions affected over 1,600 counties across 36 states at its peak – over 60% of the United States.

. Severe damage to crops (soybeans, corn) and livestock

. Low water levels along Mississippi River disrupted shipping.

. Economic Losses are estimated at $20 billion.

. Colorado: “High Park” fire near Fort Collins destroyed 257 homes and “Waldo Canyon” fire near Colorado Springs destroyed over 300 homes, becoming the most damaging fire in state history. Insured losses from both fires are estimated at $450 million. . New Mexico: “Whitewater- Baldy” fire scorched over 278,000 acres over May and

June, becoming the largest Source: FEMA wildfire in state history, but with minimal insurance impacts.

Source: USFS

. Insured losses in the United States in 2012 totaled $57.9 billion – far above the 2000 to 2011 average loss of $27 billion (in 2012 Dollars).

. Despite a relatively quiet year for tornadoes, insured losses from thunderstorm events exceeded $14 billion, the second highest annual total on record.

. Severe drought cripples agriculture over large section of central United States.

. Dry conditions lead to the most damaging wildfires in Colorado history.

Ernst Rauch Head of Corporate Climate Centre Munich Re Global Natural Catastrophe Update Natural catastrophes worldwide 2012 Significant events

With estimated 25bn US$ insured losses is Sandy the Record storm surge, New York City Hurricane Sandy, second costliest storm after severely affected USA, Caribbean Hurricane Katrina (62bn US$ in today’s values).

2012 was - until November 2012 - Losses in agriculture, Drought, USA the warmest year in the US infrastructure and navigation.

Series of earthquakes in Northern The Emilia Romagna Italy. Strongest earthquakes: earthquakes are with 1.6bn Earthquakes, Italy 20 May: magnitude 5.9 US$ the costliest losses for 29 May magnitudes 5.8 the Italian insurance industry.

From March until April Series of insured losses due to tornadoes, USA Early start of the tornado season. thunderstorms and tornadoes amounted to 7bn US$.

Number of events: 900

. The number is well above the 10-year-average (2002-2011: 800).

Fatalities: 9,500

. The number is very low in comparison with previous years (2002-2011:106,000). . The deadliest event was Typhoon Bopha in the Philippines, with more than 1,000 deaths

Overall direct losses: US$ 160bn

. 2011 is slightly below the 10-year average (2002-2011: US$ 165bn)

Insured losses: US$ 65bn

. The insured losses are above the 10-year-average (US$ 50bn) . 2012 is the third costliest year for the insurance industry worldwide (after 2011 and 2005) and the second costliest year in US (after 2005)

Number

1 200

1 000

800

600

400

200

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Geophysical events Meteorological events Hydrological events Climatological events (Earthquake, tsunami, (Storm) (Flood, mass (Extreme temperature, volcanic eruption) movement) drought, forest fire)

(bn US$)

450

400

350

300

250

200

150

100

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Overall losses (in 2012 values) Insured losses (in 2012 values)

905 Loss events 9,600 Fatalities

7% 7% 12% 18% 27% 36% 45%

48%

Overall losses* US$ 160bn Insured losses* US$ 65bn 3% 1% 10% 13% 11% 14%

63% 83% *in 2012 values *in 2012 values

Geophysical events Meteorological events Hydrological events Climatological events (Earthquake, tsunami, (Storm) (Flood, mass (Extreme temperature, volcanic eruption) movement) drought, forest fire)

Source: Geo Risks Research, NatCatSERVICE – As at January 2013 © 2013 Munich Re 35 Global Natural Catastrophe Update Natural catastrophes worldwide 2012 The five costliest natural catastrophes for the insurance industry

Insured losses Date Region Event Fatalities US$ m USA, 24-31.10.2012 Hurricane Sandy 220 25,000 Caribbean 15,000-17,000 June-Sept. USA Drought agriculture losses / average year approx. 9bn

Severe storms, 2-4.3.2012 USA 41 2,500 tornadoes Severe storms, 28-29.4.2012 USA 350 2,500 tornadoes

Severe storms, 28.6-2.7.2012 USA 18 2,000 tornadoes

Source: Geo Risks Research, NatCatSERVICE – As at January 2013 © 2013 Munich Re 36 Global Natural Catastrophe Update Natural catastrophes worldwide 2012 Insured losses US$ 65bn - Percentage distribution per continent

91% <3%

<1%

Continent Insured losses US$ m

America (North and South America) 60,000 Europe 3,200 Africa 200 Asia 1,700 Australia/Oceania 300

Source: Geo Risks Research, NatCatSERVICE – As at January 2013 © 2013 Munich Re 37 Global Natural Catastrophe Update Natural catastrophes worldwide 2012 Insured losses US$ 65bn - Percentage distribution per continent

91% 5% 2012: 91 % <3% 1980-2011: 65 % 65% <1%

<1%

Continent Insured losses US$ m

America (North and South America) 60,000 Europe 3,200 Africa 200 Asia 1,700 Australia/Oceania 300

Source: Geo Risks Research, NatCatSERVICE – As at January 2013 © 2013 Munich Re 38 Global Natural Catastrophe Update Natural catastrophes worldwide 2012 Overall losses US$ 160bn - Percentage distribution per continent

13% 16% 69%

<1%

<1% <1%

Continent Overall losses US$ m

America (North and South America) 110,000 Europe 21,000 Africa 1,000 Asia 26,000 Australia/Oceania 1,000

Winter Storm Andrea Europe, 5–6 January Cold Wave Floods Eastern Europe, Jan – Feb United Kingdom, Cold Wave 21–27 November Severe Weather Afghanistan, Jan – Mar

USA, 28–29 April Severe storms Flash Floods Floods Hailstorms, severe weather Russia, 6–8 July China, 21–24 July Canada, 12–14 August USA, 28 June –2 July

Drought Hurricane Sandy USA, Summer USA, Caribbean 24–31 October Typhoon Haikui Earthquake China, Severe Storms, tornadoes Hurricane Isaac Italy, 8–9 August USA, 2–4 March USA, Caribbean 29 May/3 June 24–31 August Earthquake Iran, 11 August

Earthquake Floods Typhoon Bopha Floods Mexico, 20 March Pakistan, 3 –27 September Philippines, Nigeria, Jul – Oct 4–5 December Floods Columbia, Mar – Jun Floods, flash floods Australia, Jan – Feb

Number of events: 905 Floods, hailstorms South Africa, 20 –21 October Floods. flash floods Australia, Feb – Mar

Natural catastrophes Geophysical events Hydrological events (earthquake, tsunami, volcanic activity) (flood, mass movement) Selection of significant Meteorological events Climatological events Natural catastrophes (storm) (extreme temperature, drought, wildfire)

Region Overall losses Insured losses Fatalities Northern Italy, Emilia Romagna US$ 16bn US$ 1.6bn 18

Source: Reuters

Region Overall losses Insured losses Fatalities South Philippines US$ 600m minor 1,100

Summary

90% of total insured losses worldwide (US$ 65bn) were attributable to the U.S. (long-term average is = 57%)

Hurricane Sandy and the U.S. drought were the costliest events

The earthquakes in Italy in May were the costliest insured losses in Italy until today

2011 was a year with no catastrophic events in terms of loss of lives, however, it was the third costliest year for the insurance industry (after 2005 and 2011) and the second costliest for the U.S. (after 2005)

Insurance Information Institute January 3, 2013

Robert P. Hartwig, Ph.D., CPCU, President & Economist Insurance Information Institute  110 William Street  New York, NY 10038 Tel: 212.346.5520  Cell: 917.453.1885  [email protected]  www.iii.org P/C Insurance Industry Financial Overview Industry Was Very Strong When Sandy Struck; Financial Strength Remains Intact for 2013

45 P/C Net Income After Taxes 1991–2012:Q3 ($ Millions)

 2005 ROE*= 9.6% P-C Industry 2012:Q3 $80,000  2006 ROE = 12.7% profits were up 222% from  2007 ROE = 10.9% 2011:Q3, due primarily to $70,000 lower catastrophe losses

 2008 ROE = 0.1% $65,777

 2009 ROE = 5.0% $62,496 $60,000  2010 ROE = 6.6%  2011 ROAS1 = 3.5%

$50,000  2012:Q3 ROAS1 = 6.3%

$44,155 $38,501

$40,000 $36,819

$35,204

$30,773

$30,029 $28,672

$30,000 $26,981

$24,404

$21,865

$20,598 $20,559 $19,316

$20,000 $19,150

$14,178 $10,870

$10,000

$5,840

$3,046 $3,043 $0

-$10,000 -$6,970 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12:Q3 * ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 6.6% ROAS through 2012:Q3, 4.6% ROAS for 2011, 7.6% for 2010 and 7.4% for 2009. Sources: A.M. Best, ISO, Insurance Information Institute A 100 Combined Ratio Isn’t What It Once Was: Investment Impact on ROEs

Combined Ratio / ROE A combined ratio of about 100 generates an ROE of ~6.6% in 2012, ~7.5% ROE in 2009/10, 10% in 2005 and 16% in 1979 18% 110 15.9% 14.3% 106.4 15% 105 12.7% 10.9% 100.6 100.8 101.0 100.9 100.1 99.3 100.0 12% 100 97.5 9.6% 95.7 7.4% 7.6% 9% 95 92.7 8.8% 4.4% 6.6% 90 4.6% 6% Year Ago 3% 85 2011:Q3 = 108.1, 3.1% ROE 80 0% 1978 1979 2003 2005 2006 2007 2008 2009 2010 2011 2012:Q3 Combined Ratio ROE* Combined Ratios Must Be Lower in Today’s Depressed Investment Environment to Generate Risk Appropriate ROEs

* 2008 -2012 figures are return on average surplus and exclude mortgage and financial guaranty insurers. 2012:Q3 combined ratio including M&FG insurers is 100.9, ROAS = 6.3%; 2011 combined ratio including M&FG insurers is 108.2, ROAS = 3.5%. Source: Insurance Information Institute from A.M. Best and ISO data. Profitability Peaks & Troughs in the P/C Insurance Industry, 1975 – 2012:Q3*

ROE History suggests next ROE 25% peak will be in 2016-2017 1977:19.0% 1987:17.3% 20% 2006:12.7% 1997:11.6%

15% 2012:Q3: 9 Years 6.6% 10%

5% 2011: 0% 4.6%*

1975: 2.4% 1984: 1.8% 1992: 4.5% 2001: -1.2%

-5%

75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

11* 12: *Profitability = P/C insurer ROEs. 2011 figure is an estimate based on ROAS data. Note: Data for 2008-2012 exclude mortgage and financial guaranty insurers. 2012:Q3 ROAS = 6.2% including M&FG. Source: Insurance Information Institute; NAIC, ISO, A.M. Best. SURPLUS/CAPITAL/CAPACITY

Industry Claims Paying Capital Was at a Record High When Hurricane Sandy Struck; Capacity Remains Close to Historic Highs for 2013; No “Fiscal Cliff” in the P/C (Re)Insurance Industry

49 Policyholder Surplus, 2006:Q4–2012:Q3

Drop due to near-record ($ Billions) 2007:Q3 2011 CAT losses Pre-Crisis Peak $583.5 $566.5 $570.7 $580 $567.8 $559.2 $559.1 $560 $550.3 $544.8 $540.7 $538.6 $540 $530.5 $521.8 $517.9$515.6 $520 $512.8 $511.5 $505.0 $496.6 $500 $487.1 $490.8 $478.5 $480 Surplus as of 9/30/12 was The Industry now has $1 $463.0 up $12.8B or 2.2% from the $460 of surplus for every $0.80 $455.6 of NPW, close to the previous record high of $440 strongest claims-paying $437.1 $570.7B set as of 3/31/12. status in its history. $420 06:Q4 07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4 11:Q1 11:Q2 11:Q3 11:Q4 12:Q1 12:Q2 12:Q3

*Includes $22.5B of paid-in capital The P/C Insurance Industry Both Entered from a holding company parent for and Emerged from the 2012 Hurricane one insurer’s investment in a non- Season Very Strong Financially. There is insurance business in early 2010. No Insurance Industry “Fiscal Cliff”

Sources: ISO, A.M .Best. 50 PREMIUM GROWTH

Catastrophe Losses Impact Trajectory of Premium Growth

51 Net Premium Growth: Annual Change, 1971—2012:Q3

(Percent) 1975-78 1984-87 2000-03 25% Net Written Premiums Fell 0.7% in 2007 (First Decline Since 1943) by 2.0% in 2008, 20% and 4.2% in 2009, the First 3- Year Decline Since 1930-33.

15% 2012:Q3 growth was 10% +4.2%

-5%

71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Shaded areas denote “hard market” periods Sources: A.M. Best (historical and forecast), ISO, Insurance Information Institute. 52 P/C Net Premiums Written: % Change, Quarter vs. Year-Prior Quarter

20% Premium growth in Q3

2012 was up 5.1% over 16.8% 16.7% Q3 2011, the strongest 15% 15.1%

13.4% growth since Q4 2006

12.5%

10.3%

10.2% 10.2% 10.1%

10% 9.7%

7.8%

7.2%

6.6%

5.6%

5.5%

5.1%

4.2%

4.1% 3.8%

5% 3.5%

3.1%

2.9%

2.3%

2.1%

1.7%

1.6%

1.3% 0.5%

0% 0.0%

-0.7% -1.3%

-5% -1.4%

-1.6% -1.6%

-1.8%

-1.9%

-3.7%

-4.1%

-4.4%

-4.6%

-5.2% -5.3%

-10% -5.8%

2002:Q1 2002:Q2 2002:Q3 2002:Q4 2003:Q1 2003:Q2 2003:Q3 2003:Q4 2004:Q1 2004:Q2 2004:Q3 2004:Q4 2005:Q1 2005:Q2 2005:Q3 2005:Q4 2006:Q1 2006:Q2 2006:Q3 2006:Q4 2007:Q1 2007:Q2 2007:Q3 2007:Q4 2008:Q1 2008:Q2 2008:Q3 2008:Q4 2009:Q1 2009:Q2 2009:Q3 2009:Q4 2010:Q1 2010:Q2 2010:Q3 2010:Q4 2011:Q1 2011:Q2 2011:Q3 2011:Q4 2012:Q1 2012:Q2 2012:Q3

Sustained Growth in Written Premiums (vs. the same quarter, prior year) Will Continue into 2013

Sources: ISO, Insurance Information Institute. 53 Growth in Net Written Premium by Segment, 2012:9 Mos. vs. 2011:9 Mos.*

(Percent)

2011: 9 Mos. 2012: 9 Mos. 7% 6.1% 6%

5% 4.2% 4.0% 3.8% 4% 3.2% 3.2% 3.3% 3% 2.4%

0% All Lines Personal Lines Commercial Lines Diversified Insurers Predominating Predominating

*Excludes mortgage and financial guaranty insurers. Source: ISO/PCI; Insurance Information Institute 54 UNDERWRITING

Underwriting Losses in 2012 (and 2011) Were Elevated by High Catastrophe Losses

55 P/C Insurance Industry Combined Ratio, 2001–2012:Q3*

Higher CAT As Recently as 2001, Heavy Use of Relatively Losses, Insurers Paid Out Reinsurance Low CAT Relatively Shrinking Nearly $1.16 for Every Lowered Net Losses, Low CAT Reserve $1 in Earned Losses Reserve Losses, Releases, Premiums Releases Reserve Toll of Soft Releases Market

120 Avg. CAT 115.8 Best Losses, More Lower Combined CAT Ratio Since Reserve Cyclical Releases Losses 1949 (87.6) Deterioration Before 110 107.5 106.4 Sandy

100.8 101.0 100.8 100.1 99.3 100.0 100 98.4 95.7 92.6

90 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* 2012:Q3

* Excludes Mortgage & Financial Guaranty insurers 2008--2012. Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=108.2; 2012:Q3=100.0. Sources: A.M. Best, ISO. 56 Underwriting Gain (Loss) 1975–2012:Q3*

($ Billions) Underwriting $35 Cumulative losses underwriting deficit through $25 from 1975 through 2012:Q3 2011 is $479B totaled $6.7B $15

-$5

-$15

-$25 High cat losses -$35 in 2011 led to the highest -$45 underwriting loss since 2002 -$55 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Large Underwriting Losses Are NOT Sustainable in Current Investment Environment

* Includes mortgage and financial guaranty insurers in all years. Sources: A.M. Best, ISO; Insurance Information Institute. Combined Ratios by Predominant Business Segment, 2012:9 Mos. vs. 2011:9 Mos.*

The combined ratios for both personal and (Percent) commercial lines improved substantially 2011:9M 2012:9M 114 through 2012:Q3, prior to Hurricane Sandy 112.0 112 110 109.4 108.0 108 106 105.4

104 102.7 102 100.0 99.4 100 98.6 98 96

All Lines Personal Lines Commercial Lines Diversified Insurers Predominating Predominating *Excludes mortgage and financial guaranty insurers. Source: ISO/PCI; Insurance Information Institute 58 INVESTMENTS: THE NEW REALITY

Depressed Yields Will Necessarily Influence Underwriting & Pricing

59 Property/Casualty Insurance Industry Investment Income: 2000–2012E1

($ Billions) $60

$54.6 $52.3 $51.2 $49.5 $50 $49.0 $47.1 $47.6 $46.8

$39.6 $40 $38.9 $38.7 $37.1 Investment earnings in 2012 $36.7 were running 14% below their 2007 pre-crisis peak

$30 00 01 02 03 04 05 06 07 08 09 10 11 12E

Investment Income Fell in 2012 Due to Persistently Low Interest Rates, Putting Additional Pressure on (Re) Insurance Pricing

1 Investment gains consist primarily of interest and stock dividends. *2012F is based on annualized 9M:2012 actual figure of $35.131B. Sources: ISO; Insurance Information Institute. Hurricane Sandy Summary

Sandy Will Become One of the Most Expensive Events in Insurance History

61 Hurricane Sandy Insured Loss Estimates: Late Season Large Loss* ($ Billions)

Average of the midpoints of the 3 risk modeler $20 - $25B RMS estimates is $18.8 billion

AIR $16 - $22B

$10 - $20B Eqecat

$0 $5 $10 $15 $20 $25

*US insured property and business interruption losses only. Sandy’s landfall in the northeast US occurred Oct. 29, 2012. Sources: RMS (11/14/12 est.), AIR (11/26/12 est.), Eqecat (11/1/12 est.); Compiled by the Insurance Information Institute. Top 12 Most Costly Hurricanes in U.S. History

(Insured Losses, 2012 Dollars, $ Billions) 10 of the 12 most costly hurricanes in insurance history occurred over the past 8 years (2004—2012)

$60 Hurricane Sandy could become the 3rd costliest $48.7 $50 Hurricane Irene hurricane in US th insurance history $40 became the 12 most expense hurricane in $30 US history in 2011 $25.6 $18.8 $20 $13.4 $11.1 $8.7 $9.2 $6.7 $7.8 $10 $4.4 $5.6 $5.6

$0 Irene Jeanne Frances Rita Hugo Ivan Charley Wilma Ike Sandy* Andrew Katrina (2011) (2004) (2004) (2005) (1989) (2004) (2004) (2005) (2008) (2012) (1992) (2005)

*Estimate as of 12/09/12 based on average of current range estimate midpoints from AIR, Eqecat and RMS; Excludes NFIP.

Sources: PCS; Insurance Information Institute inflation adjustments to 2012 dollars using the CPI. 63 Top 16 Most Costly World Insurance Losses, 1970-2012*

(Insured Losses, 2012 Dollars, $ Billions) 5 of the top 14 most expensive catastrophes in world history have occurred $60 Hurricane Sandy could within the past 3 years th $48.7 $50 become the 6 costliest event in global (private) $38.6 $40 insurance history $30 $23.9 $24.6 $25.6 $18.8 $20 $13.4 $11.1 $13.4 $13.4 $8.1 $8.5 $8.7 $9.2 $9.6 $10 $7.8

$0 Hugo Winter Chile Ivan Charley Typhoon Wilma Thailand New Ike Sandy Northridge WTC Andrew Japan Katrina (1989) Storm Quake (2004) (2004) Mirielle (2005) Floods Zealand (2008) (2012)** (1994) Terror (1992) Quake, (2005) Daria (2010) (1991) (2011) Quake Attack Tsunami (1991) (2011) (2001) (2011)**

*Figures do not include federally insured flood losses. **Average of range estimates of $35B - $40B as of 1/4/12 adjusted to 2012 dollars; Privately insured losses only. ***Estimate as of 12/09/12, based on average of midpoints from range estimates from AIR, RMS and Eqecat.

Sources: Swiss Re sigma 1/2011; Munich Re; Insurance Information Institute research. 64 Top 16 Most Costly Disasters in U.S. History

(Insured Losses, 2012 Dollars, $ Billions) Hurricane Sandy could th $60 become the 5 costliest event in US $48.7 $50 insurance history $40 Includes Includes $30 Tuscaloosa, AL, Joplin, MO, $23.9 $24.6 $25.6 tornado tornado $18.8 $20 $13.4 $9.2 $11.1 $6.7 $7.1 $7.5 $7.8 $8.7 $10 $4.4 $5.6 $5.6 $0 Irene (2011) Jeanne Frances Rita Tornadoes/Tornadoes/ Hugo Ivan Charley Wilma Ike Sandy* Northridge9/11 Attack Andrew Katrina (2004) (2004) (2005) T-Storms T-Storms (1989) (2004) (2004) (2005) (2008) (2012) (1994) (2001) (1992) (2005) (2011) (2011) Hurricane Irene became the NY Gov. Andrew Cuomo has requested 12th most expense hurricane $42 billion in federal aid. NJ Gov. Chris in US history in 2011 Christie has requested $29.4B.

*Estimate as of 12/09/12 based on average of range midpoints from AIR, RMS and Eqecat..

Sources: PCS; Insurance Information Institute inflation adjustments. 65 US Insured Catastrophe Losses

($ Billions, 2012 Dollars) $80 2012 CAT losses $70 $73.4 were down nearly 50% from 2011 until Sandy $60 struck in late October

$50

$40 $37.8

$35.0

$34.7

$33.7

$33.1 $29.2

$30 $26.4

$20 $16.3

$14.4

$14.3

$14.0

$12.6

$11.6

$11.5

$11.0

$10.5

$8.8

$8.0

$7.6 $7.5

$10 $6.1

$4.8 $3.8 $0 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12*

US CAT Losses in 2012 Could Become the 2nd or 3rd Record Tornado Losses Caused Highest in US History on An Inflation-Adjusted Basis 2011 CAT Losses th (Pvt Insured). 2011 Losses Were the 5 Highest to Surge

*As of 1/2/13. Includes $18.8B gross loss estimate for Hurricane Sandy. Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01 ($25.9B 2011 dollars). Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B ($15.6B in 2011 dollars.)

Sources: Property Claims Service/ISO; Insurance Information Institute. 66 Hurricane Sandy: Number of Claims by Type*

Hurricane Sandy resulted in an estimated 1.38 million Commercial privately insured claims resulting in an , 167,500 , estimated $10 to $25 12% billion in insured losses. Hurricane Katrina produced 1.74 million claims and Auto, $47.6B in losses (in 230,500 , 2011 $) 17%

Homeowner , 982,000 , 71%

*PCS claim count estimate as of 11/26/12. Loss estimate represents high and low end estimates by risk modelers RMS, Eqecat and AIR. PCS estimate of insured losses as of 11/26/12 $11 billion. All figures exclude losses paid by the NFIP. Source: PCS; AIR, Eqecat, AIR Worldwide; Insurance Information Institute. 67 Hurricane Sandy: Number of Homeowners Claims by State*

Hurricane Sandy •Estimated 982,000 All Other, homeowners claims** 292,000 , •$6.6 billion in 30% insured losses. •Average loss per claim is $6,718 •About 1/3 of claims in NY, 1/3 in NJ and 1/3 in all other states

New Jersey, New York, 360,000 , 330,000 , 36% 34%

*Preliminary as of 11/26/12. Source: PCS. 68 Hurricane Sandy: Value of Homeowners Claims Paid, by State* ($ Millions)

Hurricane Sandy All Other, •Estimated 982,000 homeowners $1,797 , 27% claims** •$6.6 billion in insured losses. •Average loss per claim is $6,718 •Claims in NJ estimated at $2.5 billion (38%) and $2.3 billion in NY (35%)

New Jersey, New York, $2,500 , 38% $2,300 , 35%

*Preliminary as of 11/26/12. Source: PCS. 69 Hurricane Sandy: Number of Auto Claims by State*

Hurricane Sandy All Other, •Estimated 230,500 40,500 , 18% vehicle claims •$779 million in insured losses. •Average loss per claim is $3,380 •Nearly 60% of the claims occurred in NY state.

New Jersey, 60,000 , 26% New York, 130,000 , 56%

*Preliminary as of 11/26/12. Source: PCS. 70 Hurricane Sandy: Value of Auto Claims Paid, by State* ($ Millions)

Hurricane Sandy All Other, •Estimated 230,500 $129 , 17% vehicle claims •$779 million in insured losses. •Average loss per claim is $3,380 •About 50% of the claim dollars will be paid in NY, 32% in NJ.

New York, New Jersey, $400 , 51% $250 , 32%

*Preliminary as of 11/26/12. Source: PCS. 71 Flood Loss Paid by the National Flood Insurance Program, 1980-2012E Billions (Original Values)

$20 Hurricane Sandy and other $17.74 events could result in $7.5 $18 billion in payouts from the NFIP $16 Hurricanes Katrina in 2012, second only to 2005 and Rita accounted and potentially exhausting the $14 for the majority of 2005’s record NFIP’s borrowing authority $12 $17.4B payout $10 Hurricane $7.50 $8 Ike $6 $3.47 $4 $1.85 $1.30 $2 $0.64 $0.78 $0.77 $0.23 $0.37 $0.17 $0.25 $0.61 $0 1980 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012*

*Estimate as of 11/25/12.

Sources: Department of Homeland Security, Federal Emergency Management Agency, NFIP; Insurance Information Institute. 72 Residential NFIP Flood Take-Up Rates in NJ (2010) & Sandy Storm Surge

Flood coverage penetration rates were extremely low in many very vulnerable areas in NJ, with take-up rates far below 50% in many areas

Source: Wharton Center for Risk Management and Decision Processes, Issue Brief, Nov. 2012; Insurance Information Institute. 73 Residential NFIP Flood Take-Up Rates in NY, CT (2010) & Sandy Storm Surge

Flood coverage penetration rates were extremely low in many very vulnerable areas of NY and CT, with take-up rates far below 50% in many areas

Source: Wharton Center for Risk Management and Decision Processes, Issue Brief, Nov. 2012; Insurance Information Institute. 74 Federal Aid Requests for States With Greatest Sandy Impact & Federal Aid Proposals (as of 1/2/13)

$39.5B to repair schools $33B to repair roads, bridges, subways, hospitals businesses, homes and Billions and other facilities; other facilities; $7.4B to $9B to upgrade for mitigation and infrastructure prevention against $70 against future future storms $60.4 $60.2 $60.0* $60 storms $3.2B to bury $9.0 $50 power lines, $42.0 upgrade House vote $40 $36.9 transmission scheduled $9.0 systems, build for Jan. 5 $7.9 sewage treatment $30 plants$7.4 and other$6.0 $20 mitigation projects $33.0 $29.5 $51.0 $10 $3.2 House vote $0 scheduled for Jan. 15 New York New Jersey Connecticut Obama Senate House Administration Proposal Proposal Repair Mitigation/Prevention Proposal (Dec. 28) (Jan. 2) States Requested Enormous Sums in Sandy Aid in the Middle of the

“Fiscal Cliff” Debate, Causing Delays *As of Jan. 2, 2013. Source: New York Times, Dec. 6, 2012; Insurance Information Institute research. 75 Beyond Hurricane Sandy

Before Sandy Struck, Privately Insured Catastrophe Losses Were Down 51% from 2011 Levels

76 Number of Tornadoes and Related Deaths, 1990 – 2012*

Tornadoes claimed 553 lives in 2011, the most since 1925 2,000 Number of Tornadoes 600 1,819 553

1,800 Number of Deaths 1,692 500

1,600 1,424

Number of Deaths Number 1,376

1,400 1,345

1,297 1,282

1,264 400

1,234

1,216

1,173 1,173

1,148 1,146 1,132

1,200 1,133

1,691

1,103

1,098

1,082

1,071 1,064

1,000 941 300 800 1,064 tornadoes have 200 600 been recorded so far NumberTornadoes of this year, 68 deaths* 400 100 200

0 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12* 2012 Tornado Losses Got Off to an Ominous Beginning, but Slowed. Insured Losses from Tornadoes and Thunderstorms in 2012 Totaled $14.9B.

*Through Dec. 19, 2012. Source: U.S. Department of Commerce, Storm Prediction Center, National Weather Service at http://www.spc.noaa.gov/climo/online/monthly/newm.html 77 U.S. Tornado Count, Departure from Inflation- Adjusted Running Total, 2011 vs. 2012*

2011 count was far above average

2012 count was below average, but damages were still high

*Through Nov. 30, 2012. Source: http://www.spc.noaa.gov/wcm/ 78 Location of Tornadoes in the US, 2012*

1,066 tornadoes killed 68 people through Dec. 19

*Through Dec. 19 2012. Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2012_annual_summary.html# 79 Location of Tornadoes in the US, 2011

1,894 tornadoes killed 553 people in 2011, including at least 340 on April 26 mostly in the Tuscaloosa area, and 130 in Joplin on May 22

Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# 80 Location of Large Hail Reports in the US, 2012*

There were 7,022 “Large Hail” reports through Dec. 19, 2012, causing extensive damage to homes, businesses and vehicles

*Through Dec. 19, 2012. Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2012_annual_summary.html# 81 Location of Large Hail Reports in the US, 2011

There were 9,417 “Large Hail” reports in 2011, causing extensive damage to homes, businesses and vehicles

Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# 82 Location of Wind Damage Reports in the US, 2012*

Extreme density due to late June derecho Hurricane Sandy resulted in a large volume of wind damage reports

There were 14,043 “Wind Damage” reports through Dec. 19, causing extensive damage to homes and, businesses

*Through Dec. 19, 2012. Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2012_annual_summary.html# 83 Location of Wind Damage Reports in the US, 2011

There were 18,685 “Wind Damage” reports through Dec. 27, causing extensive damage to homes and, businesses

Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# 84 Severe Weather Reports, 2012*

There were 22,131 severe weather reports through Dec. 19; including 1,066 tornadoes; 7,022 “Large Hail” reports and 14,043 high wind events

*Through Dec. 19, 2012. Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2012_annual_summary.html# 85 Severe Weather Reports, 2011

There were 29,996 severe weather reports in 2011; including 1,894 tornadoes; 9,417 “Large Hail” reports and 18,685 high wind events

Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# 86 Number of Severe Weather Reports in US, by Type, 2012

Tornadoes, 1,066 , 5%

Large Hail, 7,022 , 32%

Tornadoes accounted for just 5% of all Severe Weather Reports in Wind 2012 compared to Damage, 6% in 2011, though they caused less 14,043 , 63% damage and far fewer deaths

Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# 87 Insurance Information Institute Online: www.iii.org

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